Euro Stocks Sink on Carlyle Default, US Data

European stocks resumed their downward trajectory Thursday, wiping out the previous session’s gains, after Carlyle Capital defaulted on about $16.6 billion of debt, unsettling investors.

Wall Street managed to pull back from early losses, despite disappointing U.S. February retail sales adding to the gloomy outlook. Asian stocks suffered the worst of the global selloff in the wake of Carlyle Capital's default, which brought concerns over tight credit markets back to the forefront.

Carlyle Capital faced $400 million in margin calls recently and said it has now defaulted on $16.6 billion of debt, left with just mortgage-backed securities as assets which it expects to be seized.

Banking stocks were among the hardest hit in Europe, with the Dow Jones STOXX banking index off nearly 3 percent.

British building products company Wolseley was the biggest loser on the FTSE-100, falling 6.3 percent after Goldman Sachs cut the stock to "sell" from "neutral" based on expectations for more weakness in U.S. homebuilding.

And in Germany, auto parts supplier Continental lost 4.8 percent after a report that problems at its powertrain business are worse than expected.